The growth has not gone unnoticed by analysts. Cramer, for example, regularly raves about the “Mobile Internet Tsunami.” But the focus has been mistakenly placed on U.S. companies. That’s not where the big growth is coming. Visiting carriers from Kansas to Kuala Lumpur, one fact became very clear to me years ago: wireless data growth in the developing world will utterly dwarf that in the U.S.
Where's the Growth?
What to Do
My newsletter recommended several developing world wireless carriers months ago. These have all run up a lot, but there are still some reasonable deals left. Here are a few that I might consider buying if they pull back.
|Phillipines Long Distance Telephone||PHI||6.2||8%|
Note that SGAPY.PK and AVIFY.PK are very thinly traded ADRs.
AIS is not the bargain it was a few months ago, but it still pays a healthy yield and features double-digit Free Cash Flow. The Thai government has repeatedly delayed 3G rollouts. Once it gets finally get under way, expect AIS revenues to explode. I'm waiting for the next political crisis in Thailand to buy more AIS.
SingTel is a developing world carrier in the sense that it owns major stakes in a dozen "associates" like AIS, Bharti Airtel, and TLK. It's almost like a mutual fund of developing world carriers, with some Singapore and Australia (Optus) thrown in. Singtel just declared a special dividend bringing its yield to 8%. Its associates have actually been a drag on its growth, with the Singapore and Australia divisions outperforming. That will change as wireless data ramps up for the associates.
The numbers for the Korean Telcos, SKM and KT, are based on their prices in Korea. Unfortunately, the U.S. ADRs for these two companies trade at enormous premiums (12-14%) to the underlying Korean shares. I will only buy these on the Korean exchange, which isn't currently possible because of foreign ownership caps.
I expect PHI to post mediocre earnings for a few more quarters, until smartphone use really starts to take off. Look to buy each time earnings disappoint.
Disclosure: I am long AVIFY.PK, SGAPY.PK, PHI, TLK.